The purpose of the Register is to improve transparency on who ultimately owns and controls trusts.
In the UK, HM Revenue & Customs has oversight of the register. Under the EU Fourth Money Laundering Directive, only taxable relevant trusts needed to be registered.
The Fifth Money Laundering Directive (EU 2018/843) took effect on 9 July 2018 and member states were given until 10 January 2020 to enact. The implementation deadline preceded the UK’s exit date from the EU.
The new rules introduced by the EU fifth money laundering directive mean that it is now a legal requirement to register any UK trust deliberately created (express trust), even if there is no tax liability; for example, bare trusts. This has unexpected reach that most people would be unaware of to things like investments placed in a trust wrapper.
Non-UK express trusts must register if they acquire an interest in UK land or if they have at least one UK trustee and they enter into a business relationship with a UK adviser who is subject to money laundering regulations. They must also be registered if the trust becomes liable to UK tax.
Complex Estates which are required to submit a UK tax return for the period of the administration of the estate must also register.
Existing trusts already on the register will need to add extra data, being country of residence, nationality and the nature and extent of a beneficiary’s interest.
There is a list of types of trusts excluded from registering. For example, life insurance policies without a surrender value; trusts arising on intestacy; pension scheme trusts; charitable trusts; co-ownership trusts of jointly held property where the trustees and beneficiaries are the same persons: for example, joint bank accounts or land and property held as tenants in common.
The deadline for reporting a registrable non-taxable express trust, which was in existence on 6 October 2020, is 1 September 2022. Non-taxable trusts created after 6 October 2020 must register the later of 90 days of being created or 1 September 2022, whichever date is later.
Thereafter, trusts must be registered within 90 days of creation and once on the register, trustees should update the data within 90 days of becoming aware of any changes.
Taxable trusts have been obliged to register since July 2017. Where a trust becomes taxable for the first time, it must be registered by 5 October after the tax year of liability. Taxable trusts created after 6 April 2021 must be registered 90 days after creation or by 1 September 2022, whichever date is later.
The penalty for late registration is £100 where registration is up to 3 months late; £200 where registration is 3 to 6 months late; either 5% of the tax liability or £300 whichever is the greater sum where registration is more than 6 months late.
In addition to the reporting obligations under the EU fifth money laundering directive there are also new reporting obligations under the UK Economic Crime (Transparency and Enforcement) Act 2022, which makes provision for the registration of overseas entities who already own, or wish to own, land in the UK. The Act received Royal Assent on 15 March 2022 and creates a registration requirement at Companies House for any “overseas entity” which owns a “qualifying estate” in land in the UK, which was bought on or after 1 January 1999.
All overseas entities (including trusts) must register and disclose their beneficial owners and Companies House will allocate an overseas entity ID number for each entity registered. A failure to register or to comply with the requirement to update the register annually will mean that an overseas entity cannot be registered at HM Land Registry as the legal owner of UK land; and where already registered as legal owner, cannot sell, charge or grant a lease of the land for a term of more than seven years because any buyer, chargee or lessee will not be able to register the disposition at the Land Registry.
Compliance will be enforced through restrictions on the title registers of land owned by overseas entities. There will also be criminal sanctions for non-compliance and for delivering misleading, false or deceptive information. The Secondary legislation which provides the practical measures needed for the Act to come into force is being laid, and Companies House is currently working on the creation of the new register of overseas entities in collaboration with the UK’s land registries.